The CEB and its regulator must bury the hatchet


On February 3rd the power utility CEB cut the switch and caused a blackout. It exhausted a fuel credit line from the state petroleum supplier and couldn’t keep a thermal power plant running. The energy ministry faulted the CEB for not trying hard enough to convince the Ceylon Petroleum Corporation to extend credit for a fuel-powered plant, and for not switching to hydropower.

The CEB was also faulted for not obtaining approval for the power cut from the energy regulator, Public Utilities Commission of Sri Lanka (PUCSL). The matter ended there, but it’s part of a bigger problem. The regulator and utility have been at war for several years now and have effectively stalled the country’s energy development agenda. Bad policy and poor governance have not had a worse effect on the energy sector than has had the CEB-PUCSL feud which often misleadingly appears as a dispute over coal and green energy. Sri Lanka has an energy crisis and the reasons are multiple and complex. The Asian Development Bank (ADB) identifies three. One, Sri Lanka has not built mainstream power plants that can absorb the growing demand for electricity. Second, renewable energy development is slow. The third is CEB’s precarious financial position, mostly due to a tariff structure that ignores cost.

“Building large power plants will resolve the capacity shortage. CEB has proposed reviving the two cancelled coal-fired power plants projects and built using the latest technology,” the ADB said in a Sri Lanka energy report.

Two fuel-powered combined cycle plants are also required to deal with seasonal shortages of hydropower. An LNG import terminal will come online in 2023, three-years behind schedule. Wind and solar power face legal impediments, land availability and the lack of a clear tariff structure. Too few private investors find these attractive. Improving the investment environment is critical for developing renewable energy. Even then, renewable energy has its limitations.

Sri Lanka’s grid has a capacity of about 4,200MW of which half comes from seasonal or intermittent resource-based generation. Hydropower, with a capacity is 1,300MW, is at the mercy of the weather and has to also compete for resources with irrigation and drinking water needs. Without primary power plants, adding more renewable energy into the mix could compromise the grid.

The resilience of the power system decreases along with its ability to withstand rapid variations of outputs in the wind and solar power plants. Analyses conducted under the Sri Lanka renewable energy master plan show that stored energy would be significantly lower during the daytime, as solar (generation) capacity increases. With an energy crisis looming, Sri Lanka must quickly build primary power plants such as coal and LNG. According to the ADB, electricity production costs are increasing as the CEB burns more oil for electricity.

The cancellation of three coal plant projects has worsened the situation. The CEB had to commission an additional fuel-powered plant, contract diesel generators and extend two oilfired power plants well past their shelf life so it can keep the lights on. By 2025, without coal or LNG, CEB will sink only deeper. The ADB offers a difficult solution. The long feuding CEB and the regulator PUCSL need to bury the hatchet